How exactly does the student loan work?

I am basically a Bulgarian student studying in the UK at the moment (2nd year Marketing on a £9000 a year for 3 years scheme) and I am wondering how exactly does the student loan work?

Basically, when you graduate, they take away a % of what you earn, right? And it is in the following way: If you earn £22,000 (which is £1000 more than the threshold to start re-paying £21,000), they take 9% a year of that £1000 difference, which is £90 a year or around £7,5 a months.

If I am right (because my gf who has graduated and is currently working, told me all of this), then you have to earn really, really high salaries in order to re-pay the student loan after 25 years and probably not many graduates manage to do so.

But if that is correct, how do then uni's manage to deal with those student loans that they give to students? That's basically thousands of thousands of student loans given away to students every year. How do universities get their investments back?

Also another question. If I fail uni, the conditions for re-paying the loan are the same as if I graduate, right? They still take a % of my month salary? What about savings? If I have savings in my Bulgarian bank account (not the UK one), can Student Loan take my savings for the repayment of my loan or they don't touch those money? What if the savings are in my UK account? Same thing?

I know these are a lot of questions, but I hope that you can help me. Really appreciated.

(edited 7 years ago)

Reply 1

Tiger Rag

Your savings are ignored. It's purely your salary before tax and national insurance. (NI)

You're right - it's 9% of anything over £21k per year.

Reply 2

username738914

Original post by venom0706

You're correct yeah.

If I am right (because my gf who has graduated and is currently working, told me all of this), then you have to earn really, really high salaries in order to re-pay the student loan after 25 years and probably not many graduates manage to do so.

But if that is correct, how do then uni's manage to deal with those student loans that they give to students? That's basically thousands of thousands of student loans given away to students every year. How do universities get their investments back?

The university gets the money directly from the government, they are not the ones who lend out money. The government of the UK knows that not everyone will pay it back in full and knows that in some senses it will be part subsidising the education of a large contingent of uni-goers - it tries to somewhat offset this by applying interest to the original amount of the loan year on year.

That way even if some people don't earn enough to repay, those who do will at least offset against that with what would be a longer period of repayment to cover both the loan and the interest applied.

It's quite similar to why we have tax brackets..

Also another question. If I fail uni, the conditions for re-paying the loan are the same as if I graduate, right? They still take a % of my month salary? What about savings? If I have savings in my Bulgarian bank account (not the UK one), can Student Loan take my savings for the repayment of my loan or they don't touch those money? What if the savings are in my UK account? Same thing?

No, they can't take your savings unless you voluntarily agree to paying off your loan with some of those savings or if you were ever found to be evading repayment even though you were making enough to be eligible for repaying - student loans company is fully entitled to making you pay a lump sum on the repayments that you tried to evade if that were to happen.

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Reply 3

venom0706

Thanks for the replies!

What about dropping out of uni? Will the conditions for repaying the loan be the same? Again, a percentage of my salary will be taken, without the savings being touched upon, right?

Anyone?

Original post by venom0706

It depends at what point in the year you drop out. You owe more, the further you go through the year. If you leave mid-year (I'm assuming that you only get the Tuition Fee Loan) then Student Finance claws that year's loan money back from your uni and the uni expect you to repay that year's fee to them in full, immediately. You can usually negotiate a repayment plan. Tuition Fee Loans for previous completed years will be owed to SF, and those will be paid in the future as deductions ftom wages over £21,000.

Reply 6

venom0706

Wait, so if I have savings and something happens and I drop-out during 2nd or 3rd year, the university will claim take those money from my savings? Just like that? What do you mean when saying that the university will want that tuition immediately?

What I fear the most is failing uni (dropping out) and my savings being taken from me.

Reply 7

Klix88

Original post by venom0706

Not quite. Let's look at a hypothetical example. Say you complete your first year, but leave about half way through your second year. The first year's Tuition Fee Loan will be repaid by deductions from any future wages over £21,000.

Half of your second year's Tuition Fee Loan will have to be repaid by you, in full, as soon as you leave. However, if you can't pay it all back in a lump sum, then the uni will usually agree a gradual repayment plan.

The best thing is to complete your degree and not go into it planning to drop out.*

Reply 8

venom0706

Thanks for replying.

What I basically ask is, if I drop out (let's say 3rd year) only because of failed exams (and not willingly) AND have savings for some years in advance, the SLC won't get those savings from me (assuming that after dropping out, I start working lower paid job and clearly state my earnings)? I can keep those savings for whatever I want without fearing that the SLC might taken them for re-payment? Because if the SLC see that I have savings, they might assume that I CAN afford to re-pay the loan in a lump sum and simply take those money from me.

(edited 7 years ago)

Reply 9

Klix88

Original post by venom0706

What I basically ask is, if I drop out (let's say 3rd year) only because of failed exams (and not willingly) AND have savings for some years in advance, the SLC won't get those savings from me (assuming that after dropping out, I start working lower paid job and clearly state my earnings)?

If your exams are part way through your third year, then you will be required to repay any third year Tuition Fee Loan in full, immediately. Your uni won't care where you get the money. However if ypu have no job or a low-paying one, you could make the case that you need a gradual repayment plan, rather than repaying in a lump sum. I don't believe that they can force you to repay from savings, but you would need to check that with your uni.

I can keep those savings for whatever I want without fearing that the SLC might taken them for re-payment? Because if the SLC see that I have savings, they might assume that I CAN afford to re-pay the loan in a lump sum and simply take those money from me.

As I said, that partial third year fee will be owed to the uni and not SLC. Check with your uni. Unfortunately we can't give you the 100% reassurance you seek but it seems unlikely that you would be forced to use your savings to repay.

Reply 10

venom0706

I have never heard about uni's requiring an immediate re-payment of 3rd year's loans and that loan not being from SLC, but from the university itself, but thank you for your information. Can you please provide a source of where you are getting this info from? Thank you.

(edited 7 years ago)

Reply 11

Klix88

You can ask an official SF rep, here:
http://www.thestudentroom.co.uk/forumdisplay.php?f=910

Reply 12

Klix88

Original post by venom0706

I have never heard about uni's requiring an immediate re-payment of 3rd year's loans

It's not about your third year specifically - I was using your hypothetical situation. It's about any year where you leave before the end of the academic year. Your best bet now is to ask SF via the link I posted above.

(edited 7 years ago)

Reply 13

Chezdon

I'm looking in to a course in London and although the fees are stupidly high most if not all will never get repaid.

I'm 30, and if I do a three year course in London that's gonna cost me $27,750. Add in the $10,000 a year living loan and that's $57,750 in loans/fees. Lol.

Even if I were to leave Uni at 35 and somehow get a job for $40,000 a year, I'm paying $1,710 a year. That's 33 years of repayments. That's not even including interest (which quite frankly I can't be bothered to work out).

I guess a lot of degree holders will go on to earn more than $40,000 a year quite comfortably so actually maybe a lot of the loans do end up getting repaid.

Maybe I'll get my degree and then bugger off to somewhere else in the world.

PS My keyboard doesn't have a pound sign.